Yen hits record-high against US dollar as Nikkei falls

American and Japanese flags beside trading board A stronger currency makes Japanese exports less competitive and potentially hurts the economy
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The Japanese yen has hit its highest level against the US dollar since the end of the Second World War.

The yen climbed as high as 76.25 against the dollar in US trading on Wednesday. In Asia on Thursday, it was closer to 79.42.

The Nikkei 225 index shed 2.7% to 8,845.49 on concerns about the impact of a strong yen on exporters' profits.

G7 finance ministers have called a meeting on Thursday to discuss how to deal with global market volatility.

The G7 is a group of the world's seven richest nations, including the US, Japan, the UK and China.

Analysts expect the ministers to give Japan the go ahead to intervene in currency markets to stabilise the yen.

"It seems inevitable that the yen will be part of a broader discussion on stabilising global markets," said Alan Ruskin of Deutsche Bank.

"It would be nothing short of amazing if they fail to at least make some veiled threat of intervention," he added.
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“Start Quote

Apart from intervention, there isn't much to stop this slide and the dollar doesn't look like it's coming back soon”

End Quote Brian Dolan Forex.com

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'Nervous'

Japan's Finance Minister Yoshihiko Noda declined to comment on whether or not Japan would step into the market but said he would keep an eye on developments.

"I will be closely watching market moves today," he said.

The minister has blamed speculation for the yen's surge.

"Market moves have been nervous amid speculation, while trade has been thin," Mr Noda said.

Analysts have been blaming the strengthening of the yen on the repatriation of assets and foreign currency by Japanese insurance firms.
Cash injection

In an effort to ease market concerns and provide liquidity, Japan's central bank pumped 5 trillion yen ($63bn; £39bn) into the banking system.

This is the fourth such injection of funds by the Bank of Japan, taking its total funds inflow to 33tn yen.

Analysts say that given the current market situation and the strength of the yen, the central bank may now go a step further and intervene in markets to stem the currency's rise.

"Apart from intervention, there isn't much to stop this slide and the dollar doesn't look like it's coming back soon," said Brian Dolan, chief strategist at Forex.com.